A new adaptive optics (AO) retinal imaging system is proposed that is based on the principles of digital holography and dispenses with the wavefront sensor and wavefront modulator of conventional AO system. Digital holography (DH) is an emergent new imaging technology that gives direct numerical access to the phase of the optical field, thus allowing precise control and manipulation of the optical field. Incorporation of DH in an ophthalmic imaging system can lead to versatile imaging capabilities at substantially reduced complexity and cost of the instrument. A typical conventional AO system includes several critical hardware pieces: spatial light modulator, lenslet array, and a second CCD camera in addition to the camera for imaging. The proposed digital holographic adaptive optics (DHAO) system replaces these hardware components with numerical processing for wavefront measurement and compensation of aberration through the principles of digital holography. The wavefront sensing and correction by DHAO have almost the full resolution of the CCD camera. It is inherently faster than conventional AO because it does not involve feedback and iteration, and the dynamic range of deformation measurement is essentially unlimited. DHAO may offer additional novel imaging capabilities such as wider field of view of the retina, automatic focus over the entire FOV of curved retinal surface, topography of the retinal surface, and 3D imaging of intraocular debris distribution. The proposed project will start with a set of experiments designed to demonstrate the principles of wavefront sensing and aberration compensation by DHAO and to measure and characterize basic imaging parameters such as the resolution, point spread function, light budget, signal and noise, and dynamic range. Then a self- contained benchtop instrument is to be constructed, sufficiently compact and robust for systematic imaging experiments with realistic eye models and excised animal eyes. Development of a suite of software programs is an important part of the construction. A series of imaging experiments will be carried out to evaluate the imaging capabilities of the DHAO instrument and to develop several special imaging techniques, especially to highlight some of the unique capabilities of the proposed system. The proposed DHAO instrument will provide high resolution images of retina and other structures as well as a number of novel imaging capabilities, but with significantly lower complexity and cost compared to current technology. This will make high-resolution ophthalmic imaging available and applicable to a wider range of diagnosis and treatments in ophthalmology, such as in retinal degeneration, glaucoma, and refractive surgery.